Practice

Economic Progress For Real This Time?

Is the economy really getting better? Will Congress let it?

After such a prolonged period of gloom and doom, it is tempting to read the good news as something other than it is—good news. But in September, the AIA's Architecture Billings Index registered its highest rate of growth in two years. As ARCHITECT's Greig O'Brien notes, "Looking back over 2012, the billings index appears to be mapping the same trend that we’ve been seeing over the past three years: A growth in billings in the fall, winter, and into the spring, followed by a pullback in billings and work heading into and through the summer."

So keeping in mind that the index has been exhibiting an epicyclical pattern of growth and decline—essentially, billings rise in the fall and winter and then fall back in the summer—there are a few factors that could have a strong influence on whether the overall trend is positive. There's the election, of course. How the market responds to the election of Gov. Mitt Romney or the re-election of President Barack Obama is bound to play a role. Then there's the third round of quantitative easing. Some financial reporters are tempted to attribute the apparent surge in September housing starts to confidence in QE3. The Economist's Ryan Avent took to the pages of ARCHITECT to explain why architects have good reason to feel confident about the effects that the industry might see from QE3.

What Congress does next may decide whether these green shoots grow or fail. The AIA already explained that the fiscal cliff—the decision to stay the budgetary course or to impose sudden austerity through a combination of automatic tax hikes and spending cuts—would have a disastrous impact on the architecture and construction industries. A recent report by Bank of America Merrill Lynch describes how austerity could take away as much as 4.6 percent of gross domestic product. (TheWashington Post's Suzy Khimm breaks that report down.) President Barack Obama has already pledged that the sequester isn't going to happen, but as we all saw during the standoff over the debt ceiling, markets sometimes respond simply to the possibility of an event.

But the good news from September is still good news. And, thus far, consumers seem to be ignoring the oncoming budgetary issues and continue to shop. Ten days ago, Ben Casselman reported in TheWall Street Journal that consumers are spending more, not less, and a week later The Washington Post’s Suzy Khimm wrote a story about how the National Retail Federation is predicting that holiday spending will increase 4.1 percent this year, which is the organization’s most optimistic prediction since the beginning of the recession.

But consumers could pull back if this turns into a political crisis, akin to what happened during the partisan fight over the debt ceiling when consumer confidence plummeted. What happens next for the economy could depend on policymakers. That's not usually good news.